Comment: Dual diligence

Chairman: Ladies and gentlemen, I’d like to welcome you to this, our extraordinary shareholder meeting, at which the only item on the agenda is whether the role of chairman and chief executive should be split.

Now, I know there’s been a lot of media attention about our situation, but let me tell you from personal experience I have never met a more dedicated CEO. I share his vision for our business, his enthusiasm, his drive, his ….

Shareholder (interrupting): Wife?

Well, yes, of course. But you’re making it sound more tawdry than it actually is.

Really? It’s hard not to think this is all a bit messed up. You’re performing two roles, and yet you claim there’s no conflict. What does your wife regard you as?

I’m sorry. I don’t understand.

Is she the wife of the chairman? Or the wife of the CEO? Which role does she boast about at the tennis club?

She doesn’t play tennis…

You’re splitting hairs but, then again, that’s nothing new within this business. So imagine the vote goes against you and you lose the role of chairman, and your wife is relegated to being just the wife of the chief executive – will she be disappointed?

Well, I’d have to ask her, obviously, but I would say nothing would materially change for my wife….

…apart from your package! Would that not upset her? There must be some perks she will lose as a result of one role being stripped away.

My wife is not in this for perks. She has agreed to support me in whatever role I elect to perform.

And what if we elect that you don’t perform one of your current roles – what then? Say we give you a choice – which would you rather lose: chief executive or chairman?

This is all very silly, can we just return to the agenda please? We can’t have shareholders disrupting our extraordinary meetings without following protocol.

Well, I vote you lose the role of chairman! Show of hands please…

That’s outrageous. We haven’t even had a debate. Why should I lose the chairman’s mantel?

Well, it’s my understanding that the chairman is responsible for managing orderly meetings (annual, extraordinary or otherwise) and you obviously have been unable to do so today. So let’s strip away the chairman’s role and leave you as chief executive.

That is ridiculous. The chairman’s role is so much more than that. I am responsible for setting the board’s agenda and for overseeing its performance.

So what does the CEO actually do?

The CEO has responsibility for setting and overseeing the strategy for the business; the board oversees his or her performance.

But you oversee the board as chairman, and the board oversees your performance as chief executive. What happens if the board doesn’t approve of the CEO’s performance? Do you as chairman recommend his dismissal?

You’re making this appear incestuous. A combined chairman and CEO role can be impartial.

Did you know that a report by GMI Ratings, which studied 180 North American companies with a market capitalization in excess of $20 bn, found executives with a combined chief executive and chairman position earn a median total compensation of more than $16 mn, while a separate chief executive and chairman earn a combined $11 mn?

I did not.

And that five-year shareholder returns are nearly 28 percent higher at firms with a separate chairman and CEO? Still defending your position?

I quit.

Which role?